1. Who sets the discount rate to be used in a company investment appraisal?
(a) The commercial lending bank involved in providing company bank loans
(b) The main board of the company with authority from shareholders and investment banks based in preparing a risk assessment.
(c) The team preparing the investment case in order to present the investment to mitigate risks.
(d) Senior managers when considering the risk of the investment.
2. Based on the following information, make an estimate of the stock's beta: Month 1 = Stock +1.1%, Market +1.5%; Month 2 = Stock +1.4%, Market +2.4%; Month 3 = Stock -2.1%, Market -2.9%.
A. Beta is greater than 1.0.
B. Beta is less than 1.0.
C. Beta equals 1.0.
D. There is no consistent pattern of returns.